With the Trans-Pacific Partnership (the TPP) coming to a dramatic end, and further liberalisation of trade regulation through the World Trade Organisation unlikely, regional and bilateral agreements will be the focus in the Asia Pacific. This article considers recent developments and future prospects for liberalisation of trade and investment regulation across the Asia Pacific.
The end of the TPP
In 2015, after five years of negotiation, 12 countries across the Asia Pacific region concluded the TPP. The TPP was heralded as a 21st Century trade agreement and was seen to be a significant step towards realising a free trade era for the Asia Pacific region.
Unfortunately the election of Donald Trump brought about an abrupt end to the Partnership. On his first day in office, Mr Trump signed an executive order formally withdrawing the United States from the agreement. Although technically the TPP could still come into force, the US was a big drawcard, and as such the agreement is unlikely to continue.
Despite this, trade and investment liberalisation continues across the Asia Pacific on a regional and bilateral level. Alternative agreements are continuing to open up markets and create opportunities, particularly for intra-regional trade and investment.
Rise of the ASEAN Economic Community
On 31 December 2015, the Association of Southeast Asian Nations (ASEAN) (comprising Indonesia, Malaysia, the Philippines, Singapore, Thailand, Brunei, Cambodia, Laos, Myanmar (Burma), and Vietnam) formally created the ASEAN Economic Community (the AEC).
The goals of the AEC are to achieve the following by 2025:
- A highly integrated and cohesive economy
- A competitive, innovative, and dynamic ASEAN
- Enhanced connectivity and sectoral cooperation
- A resilient, inclusive, people-oriented andpeople-centred region
- A global ASEAN.
The AEC is the first step towards a globally competitive single market and production base, with a free flow of goods, services, labour, investments and capital across the 10 member states. The population of the ASEAN countries is over 600 million and as a common market, this region would constitute the sixth-largest economy in the world.
To date, there has been good progress within the AEC on tariff reduction, trade facilitation and investment liberalisation. In addition, free flow of skilled labour is in progress via the ASEAN Mutual Recognition Agreements (MRA) for certain professions.
Negotiation of the Regional Comprehensive Economic Partnership
While the TPP deal looks to be over, hope for a broader regional agreement remains. A number of countries in the Asia Pacific region are involved in the Regional Comprehensive Economic Partnership (RCEP) negotiations. RCEP is being negotiated by 16 countries and includes all of the ten member states of ASEAN, China, India, Australia, South Korea, Japan, and New Zealand.
Negotiations commenced in 2012 and after 16 rounds, leaders have indicated that a deal is likely to be finalised in 2017. While RCEP is unlikely to reach the same level of ambition as the TPP, it does represent another liberalisation opportunity for countries in the Asian region. There are plans to liberalise 80% of the tariffs in the region, remove restrictions on foreign investment and provide greater access to services markets.
One-on-one deals to continue
Countries in the Asia Pacific are also continuing to pursue trade and investment liberalisation on a bilateral basis. There are now over 110 bilateral agreements in force across the region. While countries such as Singapore, the Republic of Korea and Australia have been at the forefront of these deals, other countries are now also following the bilateral approach and demonstrating some willingness to liberalise in more sensitive sectors.
The future for trade regulation
With ASEAN moving towards a common market, RCEP due for completion later this year, and more bilateral trade deals likely between Asia Pacific countries, the signs that Asia Pacific economies will continue to liberalise are extremely positive. While the agreements will create a system of overlapping regulations, over time we expect that standards and rules will be consolidated and enhance intra-regional trade and investment in this fast-growing region.